Five Progressive Deficit Reduction Ideas That Both Obama And The House Republicans Failed To Endorse
"Five Progressive Deficit Reduction Ideas That Both Obama And The House Republicans Failed To Endorse"
In the past week, House Republicans unveiled their fiscal year 2011 Continuing Resolution (CR) to fund the operations of the federal government while President Obama announced his 2012 budget request.
Both of the economic plans contained within these documents take aim at the budget deficit in different ways. The House GOP’s CR has far deeper cuts to public investments and social services, including terminating $5 billion in high speed rail funding, $86 million in funding for the Corporation for Public Broadcasting, and $40 million from the Green Jobs Investment Fund.
While the Obama budget does far more to maintain public investment and does endorse some progressive means of deficit reduction — like ending billions of dollars of taxpayer support for the oil industry — it also includes a number of cuts to social services that assist working class and low-income Americans. Included among these cuts is a $100 billion reduction in the Pell Grant program that involves ending grants for summer classes and terminating federal subsidies “that pay the interest on graduate students’ federal loans while they’re in school” and cutting billions of dollars from the LIHEAP program, which funds energy assistance for low-income Americans.
Yet there are a number of progressive ways to reduce the deficit that both President Obama and the House Republicans failed to endorse. These policies, unlike deep cuts to public investment, education, and social services, would have a minimal impact on employment and job growth, and would go much further in actually closing the budget deficit. Here are five such ideas:
1. Rein In The Military Budget: Neither the president’s budget or the House CR cuts the overall level of defense spending. In fact, Defense Secretary Robert Gates’s request for the Pentagon budget is a whopping $553 billion — “the largest request ever” by the Pentagon and the largest adjusted for inflation since World War II. CAP Senior Fellow Lawrence Korb has laid out $1 trillion in defense reductions that can be made over the next 10 years by phasing out outdated programs and resizing our military. This comes out to roughly $100 billion a year, which is approximately how much funding is being proposed to be cut from the Pell Grant program.
2. Reduce Or Eliminate Subsidies To Big Agribusiness: The federal government “paid out a quarter of a trillion dollars in federal farm subsidies between 1995 and 2009.” “Just ten percent of America’s largest and richest farms collect almost three-fourths” of these subsidies. Rep. Jan Schakowsky (D-IL) has proposed — as a part of her progressive deficit reduction plan — a fifty percent cut in federal direct support for agriculture, which would save $7.5 billion in 2015.
3. Reduce Or Eliminate Wasteful Tax Expenditures: The CAP paper “Cracking the Code: A Closer Look at Tax Expenditure Spending” notes that “special credits, deductions, exclusions, exemptions, and preferential tax rates provide more than $1 trillion in subsidies intended to support public objectives,” yet are ineffective and should be reduced or eliminated. Eliminating this tax expenditure could save $100 billion, for example.
4. Enact A Financial Transactions Tax: A “0.25 percent tax on trades of stocks, bonds, derivatives, and other Wall Street financial instruments” would do little to nothing to reduce commerce or productivity but would generate “between $50 billion and $150 billion annually,” according to a CAP analysis.
5. Empower Medicare To Negotiate For Lower Drug Prices: One of the main drivers of the growing U.S. budget deficit is health care costs. While there are a number of things that can be done to streamline the efficiency of our health care system, like introducing a public option or even moving towards a Medicare-for-all system, one policy option that would be very simple to enact and would not require any sort of increased spending or expansion of government would be to simply allow Medicare to use its bulk purchasing power to negotiate with drugmakers for lower prices. Rep. Peter Welch (D-VT) estimates that doing this could save as much as $156 billion over 10 years.
While gradually reducing the U.S. budget deficit over time is a worthwhile goal, it’s important to remember that the deficit was not caused by funding for the Corporation for Public Broadcasting, students taking summer Pell Grants, or the LIHEAP program. Rather, the U.S. budget deficit is largely a result of massive tax cuts for the wealthy, two prolonged wars, an ever-expanding Pentagon budget, and a recession caused by Wall Street. It is only fair that those who caused the problem are those who have to pay to fix it.